Lahaina, Hawaii (Reuters) — Pacific Rim trade ministers failed to clinch a deal on Friday to free up trade between a dozen nations after a dispute flared between Japan and North America over autos, New Zealand dug in over dairy trade and no agreement was reached on monopoly periods for next-generation drugs.
Trade ministers from the 12 nations negotiating the Trans-Pacific Partnership, which would stretch from Japan to Chile and cover 40 percent of the world economy, fell just short of a deal at talks on the Hawaiian island of Maui.
“We have made significant progress during the last week’s meetings,” U.S. Trade Representative Michael Froman said. “We have advanced toward the conclusion.”
The result frustrated negotiators who had toiled through the night to cross off outstanding issues and made significant progress on many controversial issues.
Australian Trade Minister Andrew Robb said the problem lay with the “big four” economies of the United States, Canada, Japan and Mexico. “The sad thing is, 98 per cent is concluded,” he said.
Failure to seal the agreement is a setback for U.S. President Barack Obama, given the trade pact’s stance as the economic arm of the administration’s pivot to Asia and an opportunity to balance out China’s influence in the region.
The talks, which drew about 650 negotiators, 150 journalists and hundreds of stakeholders, had been billed as the last chance to get a deal in time to pass the U.S. Congress this year, before 2016 presidential elections muddy the waters.
The TPP seeks to meld bilateral questions of market access for exports with one-size-fits-all standards on issues ranging from workers’ rights to environmental protection and dispute settlement between governments and foreign investors.
STICKING POINTS UNCHANGED
Despite the progress made, issues pegged as sticking points going into the talks were still blocking a deal after four days of discussions.
New Zealand has said it will not back a deal that does not significantly open dairy markets, with an eye to the United States, Japan and Canada, as well as Mexico.
John Wilson, chairman of the world’s largest dairy exporter, New Zealand dairy cooperative Fonterra, arrived to attend the talks late on Thursday to press home the case.
Ministers had also yet to agree on how long to protect data used to develop biologic drugs, which a source from a non-U.S. negotiating nation described as the biggest source of frustration.
U.S. drugmakers want 12 years, but Australia wants five. People briefed on the talks had seen seven or eight years as a possible compromise.
“The U.S. was on one side of the issue, while practically every other country were on the other side,” the source said.
“Neither side was prepared to move and all claimed it as a red line issue.”
Japan and the United States had been trying to agree on the rules of origin for cars, which determine when a product is designated as coming from within the free trade zone and therefore not subject to duties.
The United States and Japan had largely agreed on the rules, but had to get buy-in from Canada and Mexico, which are closely tied in to the U.S. auto industry.
Japanese automakers source many car parts from Thailand, which is not a member of the TPP, and strict rules would upset existing supply chains. Japan also wants the United States to quickly drop duties on Japanese auto parts going to the United States.